What is a Bankruptcy?
A bankruptcy filing means that you are telling your creditors that you are unable to meet your financial obligations now or at any time in the foreseeable future. Not that you don't want to meet them, but that you financially cannot for whatever reason. Sometimes a bankruptcy filing is the result of losing one's job or falling on medical difficulty that keeps you from working the hours you need to sustain the debt you once had. Choosing to file bankruptcy as a means of debt relief means taking a drastic step in the world of credit that will be damaging and cause repercussions for you for years to come.
Executing a Bankruptcy
A bankruptcy is executed by a judge of good standing in your state only after you have filled out the proper legal paperwork and met the requirements for the particular bankruptcy you are filing. Congress recently passed laws regulating the bankruptcy process further, making it more difficult, time-consuming and costly to file as opposed to the simplicity of a debt consolidation debt relief. Often, a special bankruptcy attorney is recommended and used to help with the filing process.
What a Bankruptcy Covers
Unlike a consolidation, a bankruptcy may cover both secured and unsecured debt, meaning that you could suddenly find yourself no longer legally liable to make your mortgage payments or your car payments. This does not mean that the bank cannot come repossess the security of your loan (your house or your car), it just means that they can no longer harass or ask you for money. Most lenders with secured debt, when your bankruptcy is discharged, will allow you to keep living in your house or driving your car as long as you continue making the payments on it faithfully. Miss payments, and they may be at your door demanding the property be surrendered with no warning whatsoever (since the laws of the bankruptcy forbid them from contacting you for payment).
A bankruptcy will not provide debt relief for student loan or other federal government debt such as money owed to the IRS.